The current business and media fraternity has made us look towards the western world for inspiration (no doubt it is totally deserved) but maybe its time to take a deep hard look within and realize how, we Indians, have been atmanirbhar for a long long time. This is a summary of the book “Innovation Stories from India Inc” by Vijay Menon (link to the book can be found at the end of the article)
"Those who do not learn history are doomed to repeat it." - George Santayana
1. Ratan Tata ($103B FY16) (Architect)
He didn’t like his training period as he was not given the chance to express himself: A major block to innovation. This is a major issue in established companies in India
In Shop Floors, suggestions can be dropped in drop box, and after through review, if the idea is profitable, the employee who gave the suggestion is rewarded a part of the profit.
Also supply chain in India is a hindrance to quality as local vendors are still in the learning phase.
2. Adi Godrej ($4Billion FY16)
Three main strategies:
a) Economic Value Add: Looking at balance sheet to focus on profitable assets. Also employees at managerial level have PLVR (Performance Linked Variable Renumeration) with no upper cap. This aligns individual goal to that of the company.
b) Theory of Constraints : Eliminate bottlenecks from the supply chain/value chain. This is very important so that they can achieve their target of increasing revenue by 10 times.
c) 3×3 strategy: Focus on 3 product categories: personal care, hair care and home care in 3 geographies: Asia, Africa and Latin America
3. TVS Group – Sundaram Fastners : Suresh Krishna (Literature)
He talks about why his factories had 100% operation days with no strikes in 50 years. It is because there is a personal connect between the top management and shop floor. Aim of the company is not to be the biggest company, but to provide for their employees a chance to enter middle class and retire with a home/flat with children having good occupations. They are content and thus can focus on quality (TVS started as a bus service known for impeccable timing).Most important thing is communication between every stakeholder so that they all believe in the vision of the company.
4. Nestle India: Suresh Narayan and Amit Narain (SIBM Alumni)
Nestle has been in India before independence and had various household brands like Maggi (25%), Kitkat, Everyday, Nescafe, Cerelac, but 2015 Maggi Lead fiasco downed maggi’s 63% market share to mere 5%. Products back tracked, production stopped, a relaunch in 4 months (Diwali, 9 Nov 2016) and Maggi was back to 57% by June 2016.
Approval timeline was shortened. 10 day process now took 2. Reverse logistics for taking back Maggi taught ways to say distribution time. Younger people were given more freedom to make decisions on the go. Senior management was heavily involved, as now it became a mission to showcase that Maggi and Nestle care about health.
The company used the same processes for all the new launches thereafter, though timelines were more realistic.
5. SAP (Not gonna write about inhouse incubation and innovation chambers)
6. L&T : A M Naik
AM Naik had grown on merit to become CEO and MD of India division.
He talks about financial innovation by an engineering company to fend off super aggressive Aditya Birla Group. Birlas wanted a hostile takeover of the whole L&T (Birla’s subsidiary bought 10.5% stake which was owned by Reliance) but were only interested in the cement business. AM Naik negotiated to sell off cement (one third of L&T at that time in 2001) with Birlas selling their stake in L&T to L&T Employees Welfare Foundation, a trust run by employees.
This way L&T saved their engineering division, sold off high debt cement division(now Ultratech), their credit rating improved from AA+ to AAA, there was economic value addition and most importantly employees hold 12.3% stake worth ₹15,000 crore acting as insurance against future hostile takeovers.
7. HDFC Bank – FY16: $10 Billion: Aditya Puri: MD HDFC Bank since 1994
Housing development Finance Corporation started in 1980s to finance corporates, small businesses and individuals for housing development. Once private sector was allowed to set up banks in 1993 (after reforms), HDFC bank was incorporated in 1994. It ran on the brand value of HDFC and focussed on corporates, small businesses and then individuals (retail).
How did they do it? Well they poached banking individuals from other banks, had a defined and specialized target market approach (C+G+I : Consumption, Government, Investment spending), going digital. What Mr. Puri decided was why can’t they do what startups are trying to do as startups were piggybacking on infrastructure developed and perfected by the banking institutions.
8. Infosys: NR Narayana Murthi
Infosys was the poster boy for India’s IT boom and still continue to do so. It was the first Indian company to be listed on NASDAQ.
Getting capital where it’s cheapest
Recruiting best talented individuals and provide highest quality training
Developing product where it is cost effective
Selling where there is market
On this basis Narayana Murthi and Infosys came up with its global delivery model of software development divided into onsite work at client location and offshore software development in India by following their recruitment policies. Infosys believes in a strong code of ethics and give it the highest priority.
9. Tata Motors – Commercial Vehicles: Ravi Phisarody
Heavy and Light Commercial Vehicles are two major segments comprising of trucks, tractors, busses, and, Tata Ace, Magic series respectively. Globalization has reduced their monopoly in 1950s to 46% markets share in 2016 (Bhart Benz, Mahindra n Mahindra, Volvo, etc)
But Tata Motors have always led the indian innovation in this industry. They realized that major operating cost over lifetime of a HCV is 50% fuel, 15-20% tyres and 10-15% towards loans.
So they came up with ‘three axle’ chassis where 3rd axle can be lifted up when there is no load on the truck. This reduces number of tyres undergoing friction, thus saving on tyre as well as fuel (better economy). They also started importing ‘radial tyres’ from abroad (since there was no demand for this costly tyre in India at that time) which is durable and cost effective in the long run. Also Tata Motors have standardised service stations every 50km across the length and breadth of India. Where better roads and GST acts as a helping hand, Tata Motors will struggle with the emission norms (BS-6 is mandatory now)
10. Asian Paints : KBS Anand
AP is one of the rare companies that started with rural and then became a big brand. Instead of supplying buckets of paint, they would sell small SKU’s for small purposes like painting horns of the bull, etc.
Mr. KBS Anand talks about various innovative strategies followed by AP since its inception.
a. Pricing Innovation: Instead of providing a credit for half n year or a year (since people painted their houses during festivals), have a payment period of 45 day with an year end discount. There is an additional discount if payment is done in advance. Now 70% of AP revenue comes from advance payment.
b. Positioning Innovation: From a maintenance product to Décor Product.
c. Product + Service Innovation: Came up with AP Home Service so that customer need not look for contractor, need not buy paint, need not worry about the service. All he needs to do is make a quick phone call and AP Home service will get the job done.
d. Communication Innovation: Instead of targeting the influencers/contractors alone, AP also targeted end consumers with their marketing campaigns (like har ghar kuch kehta hai). They also realized that end consumers only cared about AP as a whole, not distinct products.
11. Dr. Reddy’s Laboratories: Not Interested
12. Titan : Not interesting
13. Marico: Not Interesting
If you have reached here, read the book yourself buy buying “Innovation Stories from India Inc” by Vijay Menon from Amazon.
Do share your thoughts on the same and send me a message.